Becoming self-employed in Ireland, also known as a Sole Trader, is a single person setting up a business on their own.

It is a quick and easy way to start a business in Ireland. Residents of Ireland can generally register as a Sole Trader in Ireland within a couple of days as long as they meet the requirements. There isn’t too much paperwork and no registration fees to pay.

If you currently have a full-time job and want to start your own business, becoming a sole trader while working full-time can be an excellent starting point. This allows you to balance your regular employment with your entrepreneurial aspirations, smoothing the transition to self-employment.

Starting a journey as a self-employed individual is an exciting venture, and we want to ensure that you have the necessary resources to set off on the right foot. If you’re ready to dive into self-employment but grappling with uncertainties, our collection of common questions and expert answers will provide you with the clarity you seek.

Should I be a Sole Trader or Limited Company?

The decision between registering as a Sole Trader or a Limited Company is pivotal, and it’s natural to feel torn between the two options. Each path has advantages and considerations, demanding careful evaluation based on your unique business requirements.

Opting for self-employment presents a relatively straightforward route to establishing your business. This streamlined approach allows you to get your venture off the ground swiftly. However, it’s important to note that while this avenue offers simplicity, it also has limitations. 

It’s essential to recognise that becoming self-employed carries inherent risks, especially concerning your personal assets. In the unfortunate event that your business faces setbacks or fails to thrive, your personal assets might be exposed. This risk underscores the importance of carefully assessing your risk tolerance when determining the most suitable business structure for your venture.

You may also miss the advantageous features of company registration in Ireland. A noteworthy benefit of registering a company in Ireland is the 12.5% Corporation Tax rate applicable to your business profits. This reduced tax rate can significantly impact your financial bottom line and make the Limited Company structure an attractive option for those looking to minimise their tax liabilities.

What taxes do self-employed people pay?

  1. Preliminary Tax. Self-employed individuals must estimate their tax liability and make a Preliminary Tax payment. This payment is due by the 31st of October each year or mid-November if using the ROS system.
  2. Universal Social Charge (USC). If your gross income exceeds €13,000 within a year, you must pay USC. Understanding this threshold is essential to ensure compliance with this contribution.
  3. Pay Related Social Insurance (PRSI). Self-employed individuals contribute to PRSI under Class S. This applies to those earning more than €5,000 annually. 
  4. Value Added Tax (VAT). Only certain conditions trigger VAT liability for businesses. If your business is VAT-registered, you’re responsible for charging VAT and submitting accurate VAT returns to Revenue.
  5. Employer’s Tax. If you hire staff to assist your business operations, you must register for Employer’s Tax and operate a payroll system. It’s important to note that self-employed people do not take a salary themselves. 
  6. Relevant Contracts Tax (RCT). Self-employed subcontractors in construction, forestry, or meat processing must register for RCT and submit RCT returns to Revenue.

How do I file tax returns as a self-employed person?

Self-employed people must prepare their Income Tax returns by completing Form 11 on or before the 31st of October each year or mid-November if you use Revenue’s Online System (ROS).

Tax returns for self-employed people are self-assessed, meaning you need to use ROS to calculate your tax liability. The process involves assessing your bills, receipts, and bank statements to calculate your tax amount accurately. Once this form is completed correctly, you must pay the Revenue tax.

We recommend seeking professional services from a qualified accountant to ensure accurate tax calculations and compliance with regulations. Our team streamlines the process of filing tax returns and ensures you are utilising the appropriate tax-deductible expenses, credits, and reliefs to minimise your tax bill at the end of the year.

What is the difference between a company name and a business name?

Distinguishing between a company name and a business name is a common query, primarily due to their seemingly interchangeable terms. Yet, a crucial distinction exists: a company name bears the designation “Limited,” whereas a business name does not.

A business name is optional for Sole Traders. In contrast, companies are mandated to possess a company name. Sole Traders can use their name as their business identity – such as ‘Mary Smith’ for Mary Smith’s business. However, should Mary Smith aspire to operate under a business name like ‘Mary Smith Designs,’ formal registration through the Companies Registration Office (CRO) is required.

There is also a difference when you apply for the name. Self-employed people apply for a business name after registering for Income Tax. Companies register a company name when they set up a Limited Company for the first time. 

Can I pay myself a salary?

Self-employed people don’t have a salary or take wages. Everything they earn is their income. You need to pay taxes out of that income at the end of the year, so planning for your tax bill is a good idea.

Sole Trader’s earnings are also known as ‘drawings’ – the money you take from the business for personal reasons.

If you want more tax-efficient ways to pay yourself as a business owner, consider changing from a Sole Trader to a Limited Company. Directors of companies have more scope on how they pay themselves.

Can I set up as a Sole Trader as a non-resident?

To be self-employed in Ireland, you need to live in Ireland. As a non-resident, consider setting up a Limited Company instead.

However, if you reside in Ireland under a Stamp 4 Visa, you can establish and operate a business within Ireland.

We recommend seeking advice and guidance from professionals who can comprehensively understand your eligibility and the steps required to set up as a Sole Trader in Ireland.

When should you switch from Sole Trader to Limited Company?

Deciding when to change from a Sole Trader to a Limited Company hinges on your business goals and aspirations. It’s essential to contemplate your future business plans and whether incorporating into a Limited Company aligns with them.

Becoming a Limited Company offers several advantages worth considering:

  1. Contractual requirements: Some entities may require you to operate as a Limited Company before entering into contracts with your business. Adhering to such requirements can expand your business opportunities.
  2. Liability liability: When you are self-employed, you’re personally accountable for business loans. In contrast, a Limited Company establishes a distinct legal entity, shielding you from personal liability in case of loans or debts.
  3. Funding accessibility: Certain organisations, like Enterprise Ireland, exclusively extend funding to Limited Companies. This shift may open doors to financial opportunities unavailable to Sole Traders.
  4. Tax efficiency: If your business generates profits exceeding your salary requirements, transitioning to a company structure can offer tax-saving benefits. Limited Companies often have more flexible tax planning options.

What support is there for new businesses in Ireland?

Starting a business in Ireland is very exciting, but it can come with compliance procedures you’re not used to.

  • Talk to your Local Enterprise Office (LEO). Your LEO is a great place to go if you need support and grants to start or develop a business in Ireland.
  • Join a networking group. Check out platforms like Meetup or Eventbrite to check out events near you. Here you’ll meet like-minded individuals who can chat with you about your business and what you can expect.
  • Short-Term Enterprise Allowance (STEA). The Department of Employment Affairs and Social Protection in Ireland offers this government support. It assists individuals who have lost their jobs in initiating new businesses. The STEA provides ongoing welfare payments while individuals establish their businesses as either Sole Traders or Limited Companies. 
  • Back To Work Enterprise AllowanceThis government initiative is for individuals under 66 receiving specific social welfare payments. It aims to incentivise and assist unemployed individuals in launching their businesses. Through BTWEA, you can continue receiving the majority or all of your social welfare payments for up to 2 years while establishing your business in Ireland. This enables you to concentrate on your business endeavours while maintaining an income from your social welfare benefits.
  • Kinore’s monthly webinars. We’re delighted to introduce you to a valuable resource tailored just for you. We’re dedicated to empowering new business owners like yourself. This webinar is designed to provide actionable insights, strategic guidance, and practical tips to navigate the intricate landscape of starting and growing a business in Ireland.